Conducting Target Market Research to Inform Digital Product Decisions
Your digital product is groundbreaking and innovative. It solves problems, and there’s a market that desperately needs it. Not only that, but it has the potential to scale way beyond where it is today.
If you’ve made the leap to start a digital product, all of the above is probably true. But that doesn’t mean that everyone in your target market is ready to buy it. Your digital product, no matter how amazing it is, no matter how much potential value it brings, just isn’t for every type of business within your target market. You’re really going to struggle to sell it to certain types of businesses or certain types of buyers, and focusing only on the types of customers that you’re best suited to serve will save you time and money in ways you might not expect.
The obvious effects of poor target customer focus are cost of customer acquisition and wasted marketing spend. Less obvious and more insidious are effects on your digital product roadmap and organization, especially if you’re able to sell in spite of poor focus. If you don’t have a target market focus that’s appropriate for your product, you’ll find that your customer feedback is suddenly full of complaints about what your product can’t do for certain use cases. Then suddenly your product roadmap is exploding with features that customers simply must have as soon as possible, or that your sales team feels are vital. The result is that you end up using all of your development investment on appeasing an audience that was never right for your product in the first place. Your product becomes a Frankenstein of functionality, and you never get around to growing your product in a visionary way.
The way you hone in on the the right audience for your digital product is through target market research. What do I mean by target market research? Traditional market research can tell you which segments have the most promise to drive revenue. Target market research takes those segments as a basis and helps you hone in on the customers who have three characteristics:
- They need what you sell. Which companies actually have the challenges that you solve?
- They are willing to buy what you sell. What alternatives or obstacles exist in your market, and which customers will be less susceptible to them?
- They are able to buy what you sell. Which companies have the regulatory requirements, security requirements, and purchase processes that allow them to buy the way you sell?
They Need What You Sell
To determine which customers actually need what you sell, it’s important to first know the real value of your digital product. This doesn’t mean the value you’re trying to bring or what you think your value is. I mean the real value that your customers have found (or if it’s a new product, hope to find) from your product, and that may very well be different from what you’ve always assumed.
To determine which customers actually need what you sell, it’s important to know the real value of your product first.
To do this properly, you need to forget everything you know. That’s a tall order, I know. But don’t let your assumptions or past investments in marketing messages cloud this effort. If you approach target market research with an open mind, you may be surprised by the valuable insights you uncover.
Take time to ask your existing successful customers or prospects some basic questions about the KPIs that your digital product is moving (or hoping to move) for them. Learn from both the users as well as the buyers how their world is different with you in it. I would encourage this to be one-on-one interviews rather than surveys. A survey means that you need to pre-write the answers that people respond to, and what is most important is capturing the thoughts of your customers or prospects in an organic way.
With the real value identified, you can start to work backwards. What kinds of customers feel most acutely the challenges you address or would most benefit from the value you bring?
They Are Willing to Buy What You Sell
To determine the types of customers who would be most willing to buy what you sell, you need to look at what might prevent them from making a purchase decision. What are they doing today? How do they work around their current challenges? What competitive digital products would they look at?
There are several options for gathering information on willingness:
- It can be very helpful to talk to sales “losses” – those prospects who said “no.” They’ll be able to tell you what their requirements were, how your product did or didn’t fall short, and how the ultimate decision was made.
- Consider talking to outside subject matter experts, meaning people who are very familiar with the domain that you want to sell into but who are not prospects or customers. They’ll be able to provide insightful information about your buyers’ challenges, decision-making processes, and alternatives.
- Do some good old-fashioned research on the web to find information on competitor products, how they market themselves, and possibly how they price themselves.
Again, use this information to work backwards: Which characteristics of buyers or customers make the alternatives unusable? In the map of your competitive landscape, what use cases are you the best at fulfilling and what kinds of customers need that the most? If you’re a newer company, what kinds of customers are willing to take a chance on an as yet unproven solution?
They Are Able to Buy What You Sell
For example, if you’re a SaaS company providing your product in a free trial or freemium model so that people can try it for themselves before starting to pay, are you targeting companies where people are allowed to download their own software?
Consider Slack, the business messaging software started in 2013. They came in with a robust, easy-to-use, and tonally friendly desktop and mobile app and a value proposition that any business could use: simple messaging for teams to improve communication and reduce email clutter. Who doesn’t need that? Startups and independent teams signed up in droves. But because of the nature of the product, not everyone could buy it. Enterprises with complex teams couldn’t implement a single instance or govern it. Companies with locked down security environments couldn’t trust it, and their employees couldn’t download it independently. Verticals requiring HIPAA or FINRA compliance couldn’t use it. By focusing on the target market who were able to buy it the way they sold it, Slack was able to successfully implement a B2U approach that allowed them to later scale to include an enterprise version, which they package and sell in a completely different way.
Talk to your prospects, subject-matter experts, and customers to learn about their purchase process, approvals processes, and the requirements their organizations have for the software they buy. Use that information to narrow down your buyer characteristics to those whose internal environments and purchase processes best match what you offer and how you offer it.
The end result of this target market research should be a set of characteristics of target companies that you can use as internal guideposts for:
- Marketing messages
- Product feedback
And, of course, that focused target market should change and grow as you change and grow. Just as you have a digital product roadmap, you can develop a roadmap for your target market that should work in concert with your product roadmap so that you have a plan for who you want to serve and how you want to serve them. You should revisit that roadmap on at least a quarterly basis, updating it to fit your business goals.
There are expensive and near-irreversible downstream affects from even the simplest product changes. Before you make them, ensure that you’ve identified the right customers in your target market for your digital product, and that you understand their world and how they buy. The insights you gain from a small investment in research and a disciplined approach to your target customers could save you from making changes that you can’t easily undo.